We welcome Revenue’s issuing of an eBrief on the tax treatment of cryptocurrency transactions.
For further information and details, please view Revenue eBrief No. 88/18.
Revenue has published a new Capital Acquisitions Tax (CAT) Strategy for 2018 to 2020.
We welcome the publication of the CAT strategy which aims to improve the management of CAT by improving service to support compliance and minimise interaction with compliant tax-payers. The improved services will help to increase customer awareness of Gift Tax and Inheritance Tax obligations.
All tax-payers should be aware of possible CAT liabilities and what they can do to reduce those costs when carrying out Estate planning.
Should you require any further information please contact us.
Businesses based in Ireland who provide electronically supplied services (e-services) to customers need to understand how to apply VAT correctly, explains Siobhán O’Hea, Partner of Tax Services.
Value Added Tax can be a complicated area for businesses who provide electronically supplied services to customers in the EU or elsewhere.
While the rules may appear daunting, it is important to familiarise yourself with the basics as getting it wrong can be costly.
What are e-services?
The first step in getting to grips with VAT is understanding what is considered an ‘electronically supplied service’ for VAT purposes.
Electronically supplied services, sometimes called ‘e-services’, cover a broad range of services delivered over the Internet or an electronic network. Examples include electronically supplied software and software updates, web hosting, online publications and e-books, the provision of online advertising on websites, music downloads, online games, distance learning programmes which are delivered wholly online without human intervention, and so on.
What these services have in common is that they could not be provided in the absence of information technology.
Tangible products, such CDs and DVDs or printed matter such as books, newspapers and journals, are not e-services even though they may be purchased online.
It is beyond the scope of this article to list everything that is, or is not, considered an e-service, however detailed listings can be found on Revenue website.
If you are in any doubt, it is advisable to seek advice from an experienced tax practitioner familiar with VAT as there is a risk that if you make an error on a sale, you will repeat it on subsequent sales. Errors that go unnoticed for a period of time can be very expensive in the long run.
Place of supply and your customer
Once you have determined whether or not your services are ‘e-services’ for the purposes of VAT, the next step is to look at the ‘place of supply’. This is because ‘place of supply’ rules determine whether a supply is subject to VAT.
If your customer is a business, the place of supply is the place where the business receiving the services is established. Businesses based in Ireland do not normally charge Irish VAT on services to a business established in other EU member states. Instead, the business customer must self-account for VAT in their own country.
If your customer is non-business (a consumer) based in the EU, the place of supply for e-services is the place where the consumer resides. This means that businesses based in Ireland who provide electronically supplied services to consumers in other EU member states are liable to register and account for VAT in each EU member state where they have customers. Revenue provides an optional mini one-stop-shop (MOSS) scheme which aims to reduce the administrative burden and cost of complying with this requirement.
Countries outside the EU
If your business is based in Ireland and you provide e-services to a business or consumer based outside the EU, no EU VAT is charged. However, if the service supplied is effectively used and enjoyed in an EU country, that country can decide to levy VAT.
E-services, provided by suppliers established in a non-EU country to consumers in the EU, must also be taxed at the place where the customer resides or has a permanent address unless the supplier has opted to use the mini one-stop-shop (MOSS) scheme. The non-Union MOSS scheme enables these suppliers to register for VAT in one EU country only.
Complying with EU VAT law
VAT is a complicated tax at the best of times and this article touches on just some of the aspects that create confusion for businesses providing e-services.
For further information and to find out how Crowleys DFK can help you comply with EU VAT law, please get in touch.
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Siobhán O’Hea
Partner of Tax Services
siobhán.ohea@crowleysdfk.ie
Finance Act 2017 introduced a change to the current 7-year capital gains tax exemption (“CGT”) which allows for investors to sell their property after 4 years instead of the previous minimum 7-year holding period.
The recent amendment means that rather than holding the property for a minimum of 7 years, taxpayers can sell the property between the 4th and 7th anniversary of the acquisition date and qualify for full exemption from CGT. This change only applies to disposals on or after 1 January 2018.
No relief is available if the property is sold during the initial four-year acquisition period.
If the property is held for longer than seven years, relief will only apply to the portion of the gain relating to the first 7 years ownership and the balance is taxable in the normal way.
The relief continues to apply to both residential and commercial property situated in Ireland or a member of the European Economic Area and to property held by individuals and corporates.
Taxpayers must continue to meet the other conditions of the relief to qualify for the CGT exemption.
Example:
Purchase a commercial property on 1 January 2014:
- Cost €200,000
- Stamp Duty €4,000
Sell the commercial property on 1 March 2019:
- Sales Proceeds €350,000
Capital Gains Tax:
- Capital Gain = €146,000 (€350,000 – €200,000 – €4,000)
Relief:
- Full CGT relief will apply as the property was disposed of between the 4thand 7th anniversary of the acquisition date. As such, no CGT is payable on the gain of €146,000
For more information on the above tax relief, please contact us.
Ireland enjoys an enviable reputation as a business-friendly location and it’s not just global giants who reap the benefits, says Edward Murphy, Partner and Head of Tax Services.
Ireland is home to many of the world’s most successful companies. Sixteen of the top twenty global technology firms are located here as are twenty-four of the twenty-five top biotech and pharma companies.
However, it is not just global giants that reap the benefits of doing business in Ireland. Many smaller companies also take advantage of the pro-business culture and ease of access to EU markets.
In the software sector alone, more than 900 multinational and indigenous firms employ 24,000 people generating €16 billion of exports annually, according to IDA Ireland, the state agency responsible for promoting foreign direct investment.
Ireland’s Foreign Direct Investment Success
One reason for Ireland’s foreign direct investment (FDI) success is the favourable tax regime. There are double tax treaty agreements in place with 72 other countries and the 12.5 percent corporate tax rate is one of the lowest in the EU.
Other advantages include an attractive holding company regime and tax incentives for certain types of investment. For example, Irish-resident companies carrying out qualifying research and development activity can avail of a ‘Knowledge Development Box’ where eligible profits are taxed at a rate of just 6.25 percent.
Tax not the only reason to locate in Ireland
While tax is undoubtedly an important consideration, it is not the only reason foreign businesses choose to locate in Ireland. Other influences include:
- Ease of doing business.
- Supportive state agencies.
- Political stability.
- EU membership and proximity to EU markets.
- Strong legal framework for the development, exploitation and protection of intellectual property rights.
- English-speaking population (When the UK leaves the EU, Ireland will be the only English-speaking EU member state).
- Strong talent pipeline with around 30 percent of Irish third level students enrolled in science, technology, engineering and maths (STEM).
- Collaborative ecosystem where industry and academics work together to the benefit of society and the economy.
- Growing economy. GDP growth of 4.4 percent is forecast for 2018 and 3.9 percent for
US and Canadian Companies in Ireland
Around 700 US companies are located in Ireland, employing more than 150,000 people. Anecdotally, US technology companies report that they can hire two engineers in Ireland for the price of one in Silicon Valley, with higher multiples for some engineering specialties.
Notwithstanding the Trump administration’s recent tax reform package which will see US corporation tax rates fall from 35 percent to 20 percent, Ireland’s corporate tax rate is still only around half the US rate when federal taxes are taken into account.
Canadian interest in Ireland is also growing. The EU-Canada trade deal which provisionally came into force in September 2017 will create further opportunities for Canadian businesses seeking to set up in Ireland.
Conclusion
At a time of global economic and political uncertainty, Ireland offers a stable, pro-business environment and is an excellent location from which companies seeking to establish a base in the EU can develop and expand their businesses.
Crowleys DFK assists many foreign owned companies to set up operations in Ireland. For more information and to discuss your specific requirements, please get in touch.
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What Our Clients Say
Edward Murphy
Partner and Head of Tax Services
edward.murphy@crowleysdfk..ie
Up to recently, landlords were not entitled to a tax deduction for pre-letting expenses such as mortgage interest, insurance and repairs incurred before the date a property was first let out.
To encourage owners of vacant residential properties to offer those properties for rent, Finance Act 2017 has introduced a new tax deduction for pre-letting expenses of a revenue nature incurred on a property that has been vacant for a period of 12 months or more.
The pre-letting expenses are now given as a deduction against rental income from that property in the first year it is let out.
Conditions
The property in question must have been vacant for a period of at least 12 months prior to its first letting during the period 25 December 2017 and 31 December 2021.
The expenditure must have been incurred in the 12 months before the property was let out and a cap of €5,000 per vacant property applies.
Claw Back
Where the landlord
- ceases to let the property as residential premises or
- sells the property
within 4 years of the first letting, this tax deduction will be clawed back in the year the property ceases to be let by the landlord.
If you have any questions about pre-letting expenses or other rented residential property queries, please contact Eddie Murphy, Partner and Head of Tax Services.
Normally, where a van is available for the private use of an employee as a result of their employment, the employee is chargeable to PAYE, PRSI and USC in respect of that private use. Travel to and from work is considered private use.
The notional pay in which PAYE, PRSI and USC must be applied is determined the ‘cash equivalent’ of the private use of the van. The cash equivalent is 5% of the (OMV) Original Market Value of the vehicle.
No taxable benefit will arise in relation to the use of a company van where all the below conditions are met:
- The van is supplied by the employer for the purpose of the employee’s work.
- The employee is required to bring the van home after work.
- Apart from travelling to and from work, other private use of the van is forbidden by the employer.
- During work, the employee spends at least 80% of his or her time away from the premises of the employer to which he or she is attached.
An exemption to the Benefit-in-Kind (BIK) rule takes place from 1 January 2018 and applies to used and new company vans. If an electric van is made available for an employee’s private use, then no taxable benefit will arise in relation to that private use. This only includes vans that derive their motive power solely from electricity.
Definition of a van
A van is a mechanical vehicle which:
- Is made solely/mainly for the transport of goods or other burden, and
- Has a roofed area to the rear of the driver’s seat, and
- Has no side windows or seating fitted in that roofed area.
Where a crew cab or other similar type of vehicle meets all these criteria, it is regarded as a van rather than a car.
Please contact us if you require assistance with the above.
The Finance Bill 2017 has introduced a tax efficient share option scheme for employees of SMEs. The Finance Bill provides that from 1 January 2018, SMEs in Ireland will be able to grant KEEP (Key Employee Engagement Programme) share options to their employees.
The change in a tax treatment of these share options means an employee may exercise a “qualifying” share option without incurring the liability to income tax, PRSI and USC that he would have under the current rules. Currently, gains arising on the exercise of a share option at a discount on market value are subject to income tax, PRSI and USC. However, KEEP provides that tax on such shares will be deferred until the shares are disposed of and the employee will pay only capital gains tax at 33% on his profit when the shares are sold.
The KEEP Scheme was introduced to facilitate the use of share-based remuneration to attract and retain key employees in unquoted companies.
A number of conditions must be satisfied in order to avail this tax advantageous KEEP Share Option incentive, which are briefly set out below:
Qualifying share options
- Shares must be new, ordinary fully paid up with no preferential, current or future rights to dividends or assets on a winding up or redemption
- Share options must have an exercise price that is not less than the market value of the underlying shares on the date the option is granted
- There must be a written contract in place setting out number and type of shares, option price and exercise period
- Share options cannot be exercised within 12 months of grant other than in limited circumstances and options cannot be exercised more than 10 years after date of grant
- Share options must be granted for bona fide commercial purposes the main purpose of which is to recruit or retain employees in the company and not part of a tax avoidance scheme or arrangement.
Qualifying company
- For the purpose of the relief the company must be a “qualifying” company i.e. must have been Ireland/EEA incorporated and Irish resident or carrying on a business in Ireland through a branch or agency
- Qualifying company must be carrying on trading activities with the exception of certain excluded activities set out in legislation. The most notable of these excluded activities include professional service companies, companies dealing in or developing land, financial activities and the building and construction industry
- The company must be unquoted and remain within the definition of an SME i.e. a company with less than 250 employees and with turnover less than €50m or less than €43m balance sheet
- The company can only have a maximum of €3m value of share options in issue and unexercised at any one time.
Qualifying individual
- Must be a fulltime employee/director working at least 30 hours per week
- The employment held must be capable of being held for at least a further 12 months from the date the option is granted
- The employee must not acquire or be connected to a person who controls more than 15% of the ordinary share capital of the company during option period
- Market value of all shares which can be granted in any year of assessment to an employee cannot exceed €100k in any one tax year, €250k in any three consecutive years or 50% of the employee’s annual emoluments for the year in which the option is granted.
KEEP will be available for qualifying share options granted between 1 January 2018 and 31 December 2023. As State Aid approval will be required to introduce this scheme, the scheme is subject to a Ministerial Order.
Contact our Tax Department if you have any questions about KEEP share options or other employee share scheme matters.
The Revenue Commissioners have issued guidance which sets out the VAT treatment of transactions concerning the transfer of money.
Guiding Principles
Transactions are defined according to the purpose and nature of the service provided and not according to the person supplying or receiving the service.
The principles that need to be considered when determining if a service qualifies for exemption are as follows:
- Exemption can only relate to transactions which form a distinct whole, fulfilling in effect the specific, essential functions of such transfers.
- An exempted service must be distinguished from the supply of a mere physical or technical service.
- A transfer is a transaction consisting in the execution of an order for the transfer of a sum of money from one bank account to another.
- A transfer is characterised by the fact that it involves a change in the legal and financial relationship existing, on the one hand, between the person giving the order and the recipient and, on the other, between those parties and their respective banks; and in some cases, between those banks.
- The transaction which produces the change is solely the transfer of funds between accounts, irrespective of its cause.
- The mere fact that a service is essential for completing an exempt transaction does not warrant the conclusion that the service is exempt
Status of the Supplier
When considering whether a service qualifies for exemption, the nature of the person supplying the service is not relevant (i.e. the supplier does not have to be a regulated financial institution). It is the nature of the service being supplied that needs to be considered.
Means by which the service is supplied
The means by which the service is supplied e.g. electronically or manually is not a decisive factor when considering the application of the exemption. Again it is the precise nature of the service being supplied that will determine the VAT treatment.
Physical or Technical Services
Where a supplier provides the infrastructure that facilitates the transfer of funds, those supplies cannot qualify for VAT exemption unless they themselves fulfill the specific and essential function of a transfer, in particular creating the change in the financial and legal relationship between the parties.
Charges for Using Certain Payment Methods
Where a supplier supplies goods or services to a customer and charges an additional fee to accept payment via a specified method, e.g. credit card, this charge is not independent from the supply of goods or services and cannot qualify for VAT exemption.
The receipt of a payment and the handling of that payment are intrinsically linked to any supply of goods or services provided for consideration. It is inherent in such a supply that the provider should seek payment and make appropriate efforts to ensure that the customer can make effective payment in consideration for the goods or services supplied.
Please contact us if you require assistance with the above.
The General Data Protection Regulation (GDPR) will come into effect from May 2018 replacing the existing data protection framework. Are you preparing for GDPR? Here are 10 tips to consider:
1. Have you created awareness?
Staff should be made aware that the law is changing to GDPR. They need to appreciate the impact that this will have and how the company will need to plan to meet those commitments and evidence of compliance.
2. Have you nominated someone to be responsible?
You should nominate someone to be responsible for data protection compliance and assess where the role will sit within your organisation’s structure and governance arrangements.
3. Do you know what information you hold?
You need to document what personal data you hold, where it came from, consent received and who you share it with. You may need to organise an information audit to do this.
4. Are your privacy notices sufficient or do you have any?
You need to review your current privacy notices and put a plan in place for making any necessary changes in time for the GDPR implementation deadline.
5. Can you facilitate the rights of individuals?
- Check your procedures to ensure they cover all the rights of individuals have, including how you would document your processing activities.
- Clearly document all the data you hold.
- Provide data electronically and in a commonly used format (portability).
6. Can you handle subject access requests?
You should update your procedures and plan how you will handle requests within the new timescales and provide any additional information.
7. How do you handle or obtain consent?
- You should review how you seek, record and manage consent and whether you need to make any changes.
- Refresh existing consents now if they don’t meet the GDPR standard.
8. What do you do if there is a data breach?
You need to ensure you have the right procedures in place to detect, report and investigate a personal data breach.
9. How do you implement or evidence Privacy by Design and perform Data Privacy Impact Assessments (DPIA)?
You need to familiarise yourself with the various code of practice on Privacy Impact Assessments as well as the latest guidance from Article 29 Working Party, and work out how and when to implement them in your organisation.
10. Is your organisation an international organisation?
If your organisation operates in more than one EU member state (i.e. you carry out cross border processing), you should determine your lead data protection supervisory authority.
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Download our infographic of the top 10 tips to consider
Pamela Nodwell
Manager, Governance Risk & Compliance
pamela.nodwell@crowleysdk.ie